With sales of distressed properties comprising a large portion of overall home sales, prices on non-distressed sales continued to reflect the downward pressure distressed sales have on underlying property values.

December marks the fifth consecutive month-to-month declines and sends home prices down 3.5 percent from a year ago. Challenges underlying the distressed housing sector will continue to restrain the housing recovery.

Based on the latest data on non-distressed home sales (existing and new homes) through December, FNC’s national RPI shows that single-family home prices fell in December to a seasonally unadjusted rate of 0.7 percent. As a gauge of underlying home value, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions. The RPI is the industry’s first hedonic price index − built on a comprehensive database blending public records with real-time appraisals of property and neighborhood attributes. One of the key advantages of the RPI is its ability to capture underlying home price trends by modeling observed sales prices as being determined by property and neighborhood attributes.

All three RPI composites (the National, 30-MSA, and 10-MSA indices) show month-to-month declines in December, ranging from -0.7 percent at the national level to -1.1 percent in the nation’s top 10 housing markets.

The indices’ year-to-year trends generally show the pace of price declines slowing. The national RPI indicates that December home prices declined at a seasonally adjusted rate of 3.5%, the smallest year-to-year declines since May 2010 when home prices rebounded under the federal homebuyer tax credits program. The year-to-year declines at the nation’s top housing markets, as indicated by the 30- and 10-MSA composites, have also decelerated to their slowest pace.

Among the individual markets tracked by the FNC 30-MSA composite index, seven showed a positive month-to-month change in December — Baltimore, Charlotte, Cincinnati, Detroit, Houston, Miami and Tampa. The largest monthly gain occurred in Houston where home prices were up again in December by 2.5 percent after rising 1.6 percent in the previous month. Baltimore, Charlotte, Detroit, and Tampa also recorded higher prices in both November and December. Atlanta, on the other hand, continues to experience rapid price declines – averaging 2.0 percent per month since August. December home prices were down 1.4 percent, 2.2 percent, 1.7 percent, 1.5 percent and 1.9 percent in Chicago, New York, San Diego, San Francisco, and St. Louis, respectively.

Year to date, the Detroit, San Francisco, and Denver markets ended 2011 with modest growth, rising 3.3 percent, 3.0 percent and 1.9 percent, respectively. In 2011, Atlanta had the worst record of price declines among the country’s major housing markets, down 10.2 percent year-to-date. It is followed closely by Las Vegas where home prices fell nearly 10 percent during the year.

On a seasonally adjusted year-to-year basis, Detroit and San Francisco again delivered the best price appreciation, rising 5.7 percent and 4.5 percent, respectively. Home prices in Boston, Denver, and Houston experienced smaller appreciation as well. Meanwhile, Las Vegas, Atlanta, and Tampa continue to rank among the worst cities for existing homeowners who continue to see double-digit declines in their property values.

Peak to date, more than half of the component markets in the FNC 30-MSA composite index have lost more than a third of the market value they had attained. Moreover, homeowners in nearly a third of the component markets have seen property values falling more than 50 percent off the peak levels. Leading the declines are Las Vegas (62.9 percent), Phoenix (59.5 percent), Riverside (59.0 percent), Sacramento (57.6 percent), Orlando (57.1 percent) and Miami (55.1 percent). At the end of 2011, only homeowners in Houston and San Antonio have seen their property values rising above the peak levels.